Archive for April, 2016

I don’t believe the role of Chief Innovation Officer has a place in today’s organizations. Today, it should be about doing the right new work to create value. That work, I believe, should be done within the organization as a whole or within dedicated teams within the organization. That work, I believe, cannot be done by the Chief Innovation Officer because the organizational capability and capacity under their direct control is hollow.

Chief Innovation Officers don’t have the resources under their control to do innovation work. That’s the fundamental problem. Without the resources to invent, validate and commercialize, the Chief Innovation Officer is really the Chief Innovation Mascot- an advocate for the cause who wears the costume but doesn’t have direct control over the work.

Companies need to stop talking about innovation as a word and start doing the work that creates new products and services for new customers in markets. It all starts with the company’s business objectives (profitability goals) and an evaluation of existing projects to see if they’ll meet those objectives. If they will, then it’s about executing those projects. (The Chief Innovation Officer can’t help here because that requires operational resources.) If they won’t, it’s about defining and executing new projects that deliver new value to new customers. (Again, this is work for deep subject matter experts across multiple organizations, none of which work for the Chief Innovation Officer.)

To create a non-biased view of the projects, identify lines of customer goodness, measure the rate of change of that goodness, assess the underpinning technologies (momentum, trajectory, maturity and completeness) and define the trajectory of the commercial space. This requires significant resource commitments from marketing, engineering and sales, resource commitments The Chief Innovation Officer can’t commit. Cajole and prod for resources, yes. Allocate them, no.

With a clear-eyed view of their projects and the new-found realization that their projects won’t cut it, companies can strengthen their resolve to do new work in new ways. The realization of an immanent shortfall in profits is the only think powerful enough to cause the company to change course. The company then spends the time to create new projects and (here’s the kicker) moves resources to the new projects. The most articulate and persuasive Chief Innovation Officer can’t change an organization’s direction like that, nor can they move the resources.

To me it’s not about the Chief Innovation Officer. To me it’s about creating the causes and conditions for novel work; creating organizational capability and capacity to do the novel work; and applying resources to the novel work so it’s done effectively. And, yes, there are tools and methods to do that work well, but all that is secondary to allocating organizational capacity to do new work in new ways.

When Chief Innovation Officer are held accountable for “innovation objectives,” they fail because they’re beholden to the leaders who control the resources. (That’s why their tenures are short.) And even if they did meet the innovation objectives, the company would not increase it’s profits because innovation objectives don’t pay the bills. The leaders that control the resources must be held accountable for profitability objectives and they must be supported along the way by people that know how to do new work in new ways.

Let’s stop talking about innovation and the officers that are supposed to do it, and let’s start talking about new products and new services that deliver new value to new customers in new markets.

In strategic planning there’s a strong forcing function that causes the organization to converge on a singular, company-wide approach. While this convergence can be helpful, when it’s force is absolute it stifles new ideas. The result is an operating plan that incrementally improves on last year’s work at the expense of work that creates new businesses, sells to new customers and guards against the dark forces of disruptive competition. In times of change convergence must be tempered to yield a bit of diversity in the approach. But for diversity to make it into the strategic plan, dissent must be an integral (and accepted) part of the planning process. And to inject meaningful diversity the dissenting voice must be as load as the voice of convergence.

It’s relatively easy for an organization to come to consensus on an idea that has little uncertainty and marginal upside. But there can be no consensus, but on an idea with a high degree of uncertainty even if the upside is monumental. If there’s a choice between minimizing uncertainty and creating something altogether new, the strategic process is fundamentally flawed because the planning group will always minimize uncertainty. Organizationally we are set up to deliver certainty, to make our metrics and meet our timelines. We have an organizational aversion to uncertainty, and, therefore, our organizational genetics demand we say no to ideas that create new business models, new markets and new customers. What’s missing is the organizational forcing function to counterbalance our aversion to uncertainty with a healthy grasping of it. If the company is to survive over the next 20 years, uncertainty must be injected into our organizational DNA. Organizationally, companies must be restructured to eliminate the choice between work that improves existing products/services and work that creates altogether new markets, customers, products and services.

When Congress or the President wants to push their agenda in a way that is not in the best long term interest of the country, no one within the party wants to be the dissenting voice. Even if the dissenting voice is right and Congress and the President are wrong, the political (career) implications of dissent within the party are too severe. And, organizationally, that’s why there’s a third branch of government that’s separate from the other two. More specifically, that’s why Justices of the Supreme Court are appointed for life. With lifetime appointments their dissenting voice can stand toe-to-toe with the voice of presidential and congressional convergence. Somehow, for long-term survival, companies must find a way to emulate that separation of power and protect the work with high uncertainty just as the Justices protect the law.

The best way I know to protect work with high uncertainty is to create separate organizations with separate strategic plans, operating plans and budgets. In that way, it’s never a decision between incremental improvement and discontinuous improvement. The decision becomes two separate decisions for two separate teams: Of the candidate projects for incremental improvement, which will be part of team A’s plan? And, of the candidate projects for discontinuous improvement, which will become part of team B’s plan?

But this doesn’t solve the whole challenge because at the highest organizational level, the level that sits above Team A and B, the organizational mechanism for dissent is missing. At this highest level there must be healthy dissent by the board of directors. Meaningful dissent requires deep understanding of the company’s market position, competitive landscape, organizational capability and capacity, the leading technology within the industry (the level, completeness and maturity), the leading technologies in adjacent industries and technologies that transcend industries (i.e., digital). But the trouble is board members cannot spend the time needed to create deep understanding required to formulate meaningful dissent. Yes, organizationally the board of directors can dissent without reprisal, but they don’t know the business well enough to dissent in the most meaningful way.

In medieval times the jester was an important player in the organization. He entertained the court but he also played the role of the dissenter. Organizationally, because the king and queen expected the jester to demonstrate his sharp wit, he could poke fun at them when their ideas didn’t hang together. He could facilitate dissent with a humorous play on a deadly serious topic. It was delicate work, as one step too far and the jester was no more. To strike the right balance the jester developed deep knowledge of the king, queen and major players in the court. And he had to know how to recognize when it was time to dissent and when it was time to keep his mouth shut. The jester had the confidence of the court, knew the history and could see invisible political forces at play. The jester had the organizational responsibility to dissent and the deep knowledge to do it in a meaningful way.

Companies don’t need a jester, but they do need a T-shaped person with broad experience, deep knowledge and the organizational status to dissent without reprisal. Maybe this is a full time board member or a hired gun that works for the board (or CEO?), but either way they are incentivized to dissent in a meaningful way.

I don’t know what to call this new role, but I do know it’s an important one.

Whether you’re a country, company, organization, or team, revolution is your mortal enemy. And that’s why the systems of established organization are designed to prevent impending revolutions and squish those that grow legs. And that’s why revolutions are few and far between. (This is bad news for revolutionary innovation and radical change.)

With regard to revolutions, it’s easiest to describe the state of affairs for countries. Countries don’t want revolutions because they bring a change in leadership. After a revolution, the parties in power are no longer in power. And that’s why there are no revolutions spawned by those in power. For those in power it’s steady as she goes.

Revolutions are all about control. The people in control of a country want to preserve the power structure and the revolutionaries want to dismantle it. (Needless to say, country leaders and revolutionaries don’t consider each other good dinner company.) And when the control of a country is at stake, revolutions often result in violence and death. With countries, revolution is a dangerous game.

With regard to revolutions, companies are supposed to be different from countries. Companies are supposed to reinvent themselves to grow; they’re supposed to do radical innovation and obsolete their best products; and they’re supposed to abandon the old thinking of their success and create revolutionary business models. As it turns out, with regard to revolutions, companies have much more in common countries than they’re supposed to.

Like with a country, the company’s leadership party is threatened by revolution. But the words are a bit different – where a country calls it revolution, a company calls it innovation. And there’s another important difference. Where the president of a country is supposed to prevent and squelch revolutions, the president of a company is supposed to foster and finance revolutionary innovation. The president of a country has an easier time of it because everyone in the party is aligned to block it. But, the president of the company wants to bring to life the much needed revolutionary innovation but the powerful parties of the org chart want to block it because it diminishes their power. And it’s even trickier because to finance the disruptive innovation, the company president must funnel profits generated by the dominant party to a ragtag band of revolutionaries.

Where revolutionaries that overthrow a country must use guerilla tactics and shoot generals off their horses, corporate revolutionaries must also mock convention. No VPs are shot, but corporate innovators must purposefully violate irrelevant “best practices” and disregard wasteful rigor that slows the campaign. And, again, the circumstances are more difficult for the company president. Where the country president doesn’t have to come up with the war chest to finance the revolutionaries overthrowing the country, the company president must allocate company profits for a state-funded revolution.

Just as revolutions threaten the power structure of countries, innovation threatens the power structure of companies. But where countries desperately want to stifle revolutions, companies should desperately want to enable them. And just as the rules of engagement for a revolution are different than government as usual, the rules of engagement for revolutionary innovation are different than profitability as usual. With revolution and innovation, it’s all about change.

Revolutions require belief – belief the status quo won’t cut it and belief there’s a better way. Innovation is no different. Revolutions require a band of zealots willing to risk everything and a benefactor willing to break with tradition and finance the shenanigans. And innovation is no different.

Successful commercialization of products and services is fueled by one fundamental – making the new one better than the old one. If the new one is better the customer experience is better, the marketing is better, the sales are better and the profits are better.

It’s not enough to know in your heart that the new one is better, there’s got to be objective evidence that demonstrates the improvement. The only way to do that is with testing. There are a number of types testing mechanisms, but whether it’s surveys, interviews or in-the-lab experiments, test results must be quantifiable and repeatable.

The best way I know to determine if the new one is better than the old one is to test both populations with the same test protocol done on the same test setup and measure the results (in a quantified way) using the same measurement system. Sounds easy, but it’s not. The biggest mistake is the confusion between the “same” test conditions and “almost the same” test conditions. If the test protocol is slightly different there’s no way to tell if the difference between new and old is due to goodness of the new design or the badness of the test setup. This type of uncertainty won’t cut it.

You can never be 100% sure that new one is better than the old one, but that’s were statistics come in handy. Without getting deep into the statistics, here’s how it goes. For both population’s test results the mean and standard deviation (spread) are calculated, and taking into consideration the sample size of the test results, the statistical test will tell you if they’re different and confidence of it’s discernment.

The statistical calculations (Student’s t-test) aren’t all that important, what’s important is to understand the implications of the calculations. When there’s a small difference between new and old, the sample size must be large for the statistics to recognize a difference. When the difference between populations is huge, a sample size of one will do nicely. When the spread of the data within a population is large, the statistics need a large sample size or it can’t tell new from old. But when the data is tight, they can see more clearly and need fewer samples to see a difference.

If marketing claims are based on large sample sizes, the difference between new and old is small. (No one uses large sample sizes unless they have to because they’re expensive.) But if in a design review for the new product the sample size is three and the statistical confidence is 95%, new is far better than old. If the average of new is much larger than the average of old and the sample size is large yet the confidence is low, the statistics know the there’s a lot of variability within the populations. (A visual check should show the distributions to more wide than tall.)

The measurement systems used in the experiments can give a good indication of the difference between new and old. If the measurement system is expensive and complicated, likely the difference between new and old is small. Like with large sample sizes, the only time to use an expensive measurement system is when it is needed. And when the difference between new and old is small, the expensive measurement system’s ability accurately and repeatably measure small differences (micrometers vs. meters).

If you need large sample sizes, expensive measurement systems and complicated statistical analyses, the new one isn’t all that different from the old one. And when that’s the case, your new profits will be much like your old ones. But if your naked eye can see the difference with a back-to-back comparison using a sample size of one, you’re on to something.